Private Credit Funds Face Investor Sell-Off

Publicly traded private credit funds, managed by major financial firms including KKR and Blue Owl, have experienced significant stock price declines in recent weeks, as investors question the quality of underlying loans. This trend, observed by March 12, 2026, reflects growing concerns over transparency and lending discipline within the $2 trillion private credit industry.

Business Development Companies (BDCs), a common vehicle for retail investors to access private credit, now trade at an average of 78 cents per dollar of reported assets, down from 85 cents at the start of 2026 and approximately one dollar in early 2025, according to Morningstar data. This discount indicates investor skepticism regarding the estimated value of these assets.

Most of the 20 largest BDCs have seen their stock prices fall relative to asset values over the past year, with nearly all now trading at discounts.

The sector's decline is partly driven by worries about artificial intelligence's potential impact on software companies, a significant area for private credit lending. Examples include FS KKR Capital Corp trading at 51 cents per dollar of assets and Blue Owl Technology Finance Corp at 68 cents.

Large managers, while defending their portfolios, have acknowledged strains, with some borrowers struggling. The current discounts reflect fears of a recession and increased loan losses, leading to limited redemptions in non-traded BDCs by firms like Morgan Stanley and BlackRock.